Day: November 2, 2015

Although a necessary expense, financially speaking, a car is not a good investment. This is true because a car will depreciate in value immediately after it is purchased and will continue to depreciate the older it gets. The specific amount of depreciation will vary from car to car but probably the most important factor to determine the amount of depreciation and the rate at which a car will depreciate is whether the car is new or used. Both new and used cars depreciate; however, new cars will depreciate much faster than used cars.

This depreciation will occur in a generally predictable manner. Typically, new cars depreciate 20% by the end of the first year after purchase. The moment a person drives a new car off the lot it becomes a used car and after this transformation approximately 10 percent of its value will evaporate. By the end of the first year after purchase, that same car will depreciate an additional 10 percent on average. Less popular models with fewer bells and whistles tend to depreciate more than popular models with additional features, sometimes loosing 50 percent of their value in many cases. Typically, new cars lose value for four years after the first year after purchase, ranging from 15-25 percent per year. All told, new cars tend to lose 60 percent of their original value by the fifth year after purchase. Purchasing a relatively new used car will avoid the first-year rapid depreciation, but even used cars depreciate over the first five years after purchase.

Obviously, there are many factors that determine how much any one particular car will depreciate over a given period of time. If you are buying a used car in Salt Lake City you may want to use a car depreciation calculators available on the internet. These calculators may help you to decide whether one car is a better purchase than another.